Form 1099 – Not to be Ignored

From the Desk of Lauran L. Stevenson

Form 1099 – Not to be Ignored

The difference between a 1099 and a W2 employee is how the monies and information on those forms are reported. Form 1099 and W2’s are considered “information returns” by the IRS, and the information reported on these forms are directly reported on a person’s IRS transcripts. Employers report wages and withholding directly to the Social Security Administration and in turn, shares that information with the IRS. Payers use Form 1099 to report payments or monies paid to an individual who is not a W2 employee or entity that is not affiliated with the payer. Form 1099 is filed with the IRS, The State Tax Department, and a copy is provided to the payer and payee.

Individuals or entities that receive a 1099 in their name should treat them as equal to receiving a W2, and they should never be excluded or forgotten when it comes time to file a tax return. Forgetting or excluding a Form 1099 increases the chance of an IRS audit, as these forms are matched to either a Social Security Number or an EIN (Employer Identification Number). Another way to avoid missing any Form 1099s is to alert your tax preparer or the IRS if a change of address occurs.

Mistakes or errors are not frequent, but these errors can happen. If you notice an error on a Form 1099, inform the payer who issued the Form 1099 immediately, so there can be time for the payer to correct the mistake.